


Book_i_ a_ 

Copyright N°_ 

COPYRIGHT DEPOSIT. 




The way to wealth depends 
chiefly on industry and fru¬ 
gality. — FRANKLIN 









Dep’t of Modern Foremanship Chicago, Ill. 


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LaSalle Extension University 

MICHIGAN AVENUE AT FORTY-FIRST STREET • CHICAGO 


DEPARTMENT OF 
MODERN FOREMANSHIP 
HUGO DIEMER, DIRECTOR 


To the Members of 
Modern Foremanship and 
Production Methods Groups: 

This manual on "What Is Production and Why?" takes up another of the 
factors which interfere with production—a discontented mind. 

You know how the mental attitude of a worker affects his production. 
Every production man has met workers who are top-notch men one day and 
far below standard another. Worry over financial or domestic problems, 
late hours or other outside influences, discord between the worker and 
his foreman or associates, or wrong thinking on industrial subjects, 
will have their effect upon the production of the man, both as to quan¬ 
tity and quality. 

In the manual on "The Working Force," you remember, we took up the 
normal instincts and desires to which you may appeal to get the co-op¬ 
eration of the men. Under ordinary conditions, from the analysis which 
you made of your working force, you could expect a natural reaction from 
any specific appeal to a desire or instinct, according to the strength 
of that desire or instinct in the individual. But every production man 
knows that when the mental attitude is not right, the appeals do not 
have the effects they should. 

Another factor that influences the mental attitude is the working sur¬ 
roundings and conditions. How these affect the men and production was 
taken up in the manual on a "Good Place to Work." 

There are, however, still other factors, in addition to working con¬ 
ditions, which interfere with the normal action and reaction of desires 
and instincts. One of the most common is the discontented mind, which 
is troubled by wrong ideas or misunderstandings of the importance and 
necessity of work and its relation to the worker. 

Production executives have an important problem to combat in these mis¬ 
understandings of workers. By setting them right, the executive puts 
them in a frame of mind where the normal instincts and desires which 
ordinarily influence actions, are constructive rather than destructive. 
Many of these wrong impressions which prevent men from doing their best, 
are explained in this manual. 

The practical problem with this manual affords you an excellent oppor¬ 
tunity to give constructive thought towards diverting the minds of some 
of your "wrong thinkers" into the right channels. 

Very truly yours. 























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LaSalle Extension University 

DEPARTMENT OF MODERN FOREMANSHIP 
HUGO DIEMER, Director 

CHICAGO 

PLEASE FILL THIS IN FIRST 


Matriculation No._ Date_192_ 

Name___ 

Address (complete)_ 

Always fill this in so that we can identify you, handle your problem promptly, 

and give you credit for your work 


PRACTICAL INDUSTRIAL ECONOMICS—PROBLEM NO. 12 


Take a look over your working force and pick out those who are 
most interested in their work and most ambitious to succeed. Do 
these men cause you any trouble unless it happens that you have 
nothing for them to do? Probably not. The difficulties come from 
others. 

No doubt when picking out this group of good workers, you noticed 
one characteristic common to most of them—they were savers. 

Didn't several own their homes and most of the rest have savings 
accounts? 

Generally, men with homes or with savings accounts are ambitious, 
are striving to get ahead, and have a clear, sane view of their 
work, its necessity, and its relation to the rest of the industry. 

Obviously, then, if we can get our workers to save and invest 
money, we are building up a class of men whose thoughts are not 
distracted from their work, men who look on work and its princi¬ 
ples with the right attitude. The accompanying problem gives you 
an opportunity to try out your ability along this line. 

Suppose you decide that the best way to get a contented working 
force is to organize and promote a thrift campaign. In this, a 
definite amount is to be deposited each pay in a savings bank to 
the credit of the worker. The company is to give a bonus at the 
end of the year to all those who deposit in this account regularly 
and consistently. In this plan you will meet some objections which 
you must answer. A few of these are given on the next page. 








First, tell just how you would meet each of the following objections 
if they should be raised by one of the workers, when you talked 
over the plan. Give the arguments you would use in detail. 

(a) "I get only 3 per cent, when the bank lends it cut at 6 per 
cent." 

(Remember that he deposits his savings in small amounts of a few 
dollars a week, while the bank accumulates the savings of deposi¬ 
tors and puts them in loans of the size which the borrowers demand.) 


(b) What would you say to another man who said, "My wife and I 
spend all that I make. I do not know where it goes, but it 
gets away somewhere." 

(Do not stop with simply telling him that he is doing wrong, but 
give him suggestions on how to spend his money and the amounts he 
should spend for food, clothing, rent, etc. In other words, make 
out a budget for this man.) 


(c) Suppose he says: "Oh, a dollar or two a week is only fifty or a 
hundred a year. Why should I bother with it?" 



# 


WHAT IS PRODUCTION 
AND WHY? 


THE TWELFTH WORK MANUAL 

MODERN FOREMANSHIP 

AND 

PRODUCTION METHODS 


The Tested Experience of Practical Production Men 


Assembled, Organized, and Edited by 

HUGO DIEMER, MEYER BLOOMFIELD, DANIEL BLOOMFIELD, 
AND E. F. DAHM 


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I » 

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LA SALLE EXTENSION UNIVERSITY 


OA-12 


CHICAGO 



Copyright, 1921 
All Rights Reserved 

LA SALLE EXTENSION UNIVERSITY 


DEC -3 1921 


47 " 477 Id 

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3>Ct A630627 


There are two kinds of discontent—healthy and un¬ 
healthy. Healthy discontent spurs us on, makes us 
dissatisfied with any but the best workmanship, and 
causes us to put aside earnings to protect ourselves 
and our families against old age. This healthy discon¬ 
tent—ambition, we often call it—sets a goal, and we 
are not satisfied until we reach it. 

Unhealthy discontent, however, gives us a “grouch,” 
makes us dissatisfied with what we do and with our 
relations to industry. It holds us back instead of urg¬ 
ing us on to accomplish more. 

One of the important causes of this discontent is 
wrong thinking or misunderstanding of the laws of 
work. Some of these laws of work are taken up in 
this manual on “What Is Production and Why?” 
Their explanation will assist in correcting misunder¬ 
standings and wrong thinking, which interfere with 
a man’s giving his best. 


THE MODERN FOREMANSHIP 
COUNCIL 

There are production managers, practicing foremen, 
executive officers, labor managers, and educators on 
this Foremanship and Production Methods Council. 

Tho from different walks of life, they have one strong 
tie binding them together—that is, their experience 
with and interest in the work of modern foremen and 
production. 

The Council reviews the course and lessons and serves 
in an advisory capacity. It brings to bear on the plan¬ 
ning, organization, presentation, and service of the 
Modern Foremanship and Production Methods Course 
the judgment of many experts in practically every line 
of industry. You profit by their tested experience 
exactly as you do by your own. 


THE MODERN FOREMANSHIP COUNCIL 


Hugo Diemer, Practical Adviser and Director, Modern Fore- 
manship and Production Methods Course 

Meyer Bloomfield, Editor-in-Chief 

Daniel Bloomfield, Associate Editor, of Bloomfield & 
Bloomfield, Boston 

Leroy Tabor, The Tabor Manufacturing Company, Philadel¬ 
phia, Pa. 

George R. Townsend, Manager, International Steel and Ord¬ 
nance Company, Lowell, Mass. 

Richard A. Feiss, Vice President, The Joseph & Feiss Com¬ 
pany; Manager, The Clothcraft Shops, Cleveland, Ohio 

J. L. Akerson, Vice President, Merchant Shipbuilding Cor¬ 
poration, Philadelphia, Pa. 

J. M. Carmody, Production Manager, The H. Black Company, 
Cleveland, Ohio 

F. C. Shafer, Factory Manager, Pemberthy Injector Company, 
Detroit, Mich. 

Matthew Porosky, Chairman, Factory Management Commit¬ 
tee, The Holtzer Cabot Company, Boston, Mass. 

S. Babcock, General Foreman, Power Plant, Westinghouse 
Electric and Manufacturing Company, East Pittsburgh, Pa. 

Boris Emmet, Labor Manager, Henry Sonneborn and Com¬ 
pany, Inc., Baltimore, Md. 

Allen B. Crow, in charge of Home Builders Service Depart¬ 
ment, Stroud Lumber and Woodwork Company, Detroit. 

B. E. Mallary, Foremanship Training, Board of Education, 
Cleveland, Ohio. 

William Bethke, Educational Director, LaSalle Extension 
University. 

E. F. Dahm, Assistant Educational Director, LaSalle Exten¬ 
sion University. 



THE MANUALS IN THE COURSE 


1. The Foreman and His Job 

2. The Working Force 

3. Leadership 

4. The Foreman and Training 

5. The Foreman and Job Analysis 

6. The Flow of Work 

7. A Good Place to Work 

8. Getting the Work Out 

9. The Foreman as Stockkeeper 

10. Cost Control in the Shop 

11. Wages and Incentives 

12. What Is Production and Why? 

13. Industrial Organization 

14. The Foreman and the Law 
The Foreman and Industrial Service 


15 . 


CONTENTS 


Unrest in industry 

Healthy and unhealthy discontent 

The “why” of production 

The history of the growth of production 

What modern industry brought 

The basic factors of production 

Land, capital, labor, and management 

What is capital? 

Why capital is necessary 
Where capital comes from 

What is labor? 

Why work is necessary 

Will the “labor reservoir” get empty? 

Why we have management? 

What management includes 
The foreman’s place in management 
What makes an executive 
Getting men to managing themselves 

Problems of modern industry 

Bringing men and management together 
Understanding profits 

How the production factors facilitate business 

How a business' grows 
The specialization of labor 
How standardization affected industry 
What is efficiency? 

Where competition helps industry 



WHAT IS PRODUCTION AND WHY? 


This manual takes up many of the facts pro¬ 
duction men are called upon to explain every 
day which show the relation of work and work¬ 
ers to their job, to the rest of the shop, and 
even to the place they take in the whole in¬ 
dustrial system. 

All executives are confronted, some more than 
others, with questions or situations which 
must be dealt with wisely. These questions 
have to do with production only indirectly. 

But they affect production directly, and some¬ 
times disastrously, if they are dealt with un¬ 
wisely. The questions we refer to are de¬ 
scribed in the word, which we may not clearly 
understand, “Economics.” Yet the big word 
covers for the most part simple, everyday 
ideas, so far as the average executive is con¬ 
cerned. But they are simple only to the man 
who makes it his business to understand them 
as they come up, and they keep coming up 
every day, whether he understands them or 
not. 

These ideas have to do with questions under- 


8 


MODERN FOREMANSHIP 


lying production, and they are bothering a 
good many people. Much agitation and trou¬ 
ble, to say nothing of oceans of discussion, all 
center on the notions, right or wrong, which 
men have regarding what production is, the 
reasons for production, and the justification 
for a given industrial program. However, 
when these reasons for production are prop¬ 
erly explained so that men can understand 
their necessity and their use, they set men’s 
minds at rest. 

Overcoming Misunderstandings 

“If we could all get together,” many an em¬ 
ployer has said, “and come to an understand¬ 
ing about our common interests and problems, 
if we could once and for all grasp just what 
it is that makes an industry go up or down or 
out, we could settle nearly all the questions 
that have been bothering us and upsetting our 
relations in the plant.” 

There will always be differences of opinion, 
however; such is human nature. Our law 
courts or boards of arbitration take care of 
these. Life is a game of adjustment, giving 
and taking, and trying to square our wants 
with the wants of others, our rights with the 
rights of others. 




WHAT IS PRODUCTION AND WHY? 


9 


Healthy and Unhealthy Discontent 

We must remember, however, that discontent 
is not always harmful. It often serves as the 
spur which urges some men onward. This 
healthy type of discontent is generally called 
ambition, pride in work, a desire to possess, 
or some other normal desire which makes men 
willing to make the extra effort necessary to 
get ahead. Because of these, the foreman has 
risen from the bench, the workman has bought 
his home, the employer has come up from the 
ranks of the laborers. These desires can be 
furthered, as they are the factors which cause 
progress. With them come hard work, co¬ 
operation with others, and thrift—the price 
of success. Men of this type do not ask why 
they work. They have a purpose, a goal ahead 
of them. 

The unhealthy type of discontent acts differ¬ 
ently. It pulls men backward instead of ad¬ 
vancing them. It is discontent, but differs in 
that it did not have a purpose. Many men 
are given over to unhealthy discontent because 
they do not know. 

It is this unhealthy discontent that has been 
interrupting work with disturbances of vari¬ 
ous kinds. Because of the production ex- 



10 


MODERN FOREMANSHIP 


ecutive’s close contact with the men in the 
ranks, he has a wonderful opportunity to 
change their attitude from unhealthy to 
healthy discontent. 

When discontent flows thru constructive chan¬ 
nels, much good can be accomplished. When 
it takes the form of obstruction, violence, ha¬ 
tred, and ill will, only mischief can result. 

Who Are the Producers? 

Some men feel that because they use muscle 
and work with their hands that they are the 
only true producers. But is it necessary to 
touch the plow to help the farmer produce his 
wheat? Do not the men who make the plow, 
those who handle the train which carries it 
to the farmer and carries away the grain, 
those who sell him the plow, those who make 
and erect the fence which protects his field, 
those who provide his shoes, as well as many 
others, assist, perhaps unknowingly, in the 
production of the wheat? 

Doesn’t almost everyone for that matter pro¬ 
duce? Of course there are nonproducers? A 
few are idle, and some are thieves. There 
are those who destroy property, and those en¬ 
gaged in what we know as dishonest means 
of obtaining what they want. Our laws and 



WHAT IS PRODUCTION AND WIIY? 


1] 


their enforcement protect us from this class 
of people, which is small in number. 

What Is Production? 

The great mass of our associates assist in the 
performance of a helpful service for others. 
To do this, broadly, is producing. Production 
may consist of a service either of convenience 
or necessity which can be used in the perform¬ 
ance of a service for ourselves or for others. 
The dictionary defines production as the act 
of producing (which is work) by the applica¬ 
tion of intellect or labor. From this we see 
that the man whose mental effort is applied 
to the job is as much a producer as one who 
uses muscle. 

The act of producing (or work) takes many 
forms to-day, some of which are closely re¬ 
lated to actual production. These we call di¬ 
rect producers or direct labor. Others not so 
closely related we refer to as indirect produc¬ 
ers or indirect labor. In the manual on “Cost 
Control in the Shop” we define our shop dis¬ 
tinction between indirect and direct labor on 
work in the shop. Practically no one will dis¬ 
pute that the workers classed as direct labor, 
those on the machines or at the bench, are 
producers. 



12 


MODERN FOREMANSHIP 


Some Are Indirect Producers 

But what about the many other men, includ¬ 
ing the foremen and other production men, 
who are classed as “indirect” labor, or whose 
salaries are included in the overhead ex¬ 
penses? These men contribute toward the 
production with their intellect, and in many 
cases even with muscle, altho they may not 
be able to claim that they make any individual 
part of the finished product. Each, however, 
has definite work to do which has its part or 
place in the production of the whole. 

But production is not limited to those in the 
plant. The doctor who makes us well, the 
lawyer who tells us how to keep out of trouble, 
the investor who provides funds for invest¬ 
ment, the policeman who protects us and our 
homes, those who write books or magazines 
for our instruction or entertainment, and 
many others are also producers or workers. 
That is, repeating our interpretation of a pro¬ 
ducer, they perform an intellectual or labor 
service of necessity or convenience for them¬ 
selves or for others. 

“Why Do We Have to Work?” 

But, we might ask, why do we have to per- 






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WHAT IS PRODUCTION AND WHY? 


13 


form these services—to produce, or as most 
men put it, “Why do we have to work?” A 
brief answer to this is that if we want any¬ 
thing we have to work for it. The savage, 
with wild fruits and game in abundance, must 
get them—must work—if he is to use them. 
But in this he does so little work that he does 
not get ahead very far. 

Work—the basis of our development—has 
some basic principles which will guide us in 
our efforts toward progress or advancement. 
These basic principles of industry, commonly 
called in textbooks “industrial economics,” are 
simply truths or facts that underlie all indus¬ 
try. When we forget these truths or princi¬ 
ples, we get into a false way of thinking which 
interferes with production and progress. 

There are many points concerning these basic 
principles about which there is a difference 
of opinion, but reasonable men on the whole 
are agreed that some propositions may be ac¬ 
cepted as laws of industry or of work. To 
break them or to disregard them is to invite 
failure. 

Every man connected with industry will find 
it helpful to know and to understand these 
principles. Men connected with production, 



14 


MODERN FOREMANSHIP 


in particular, find opportunities to apply them 
to their everyday shop experience, and to put 
straight those men who labor under a mis¬ 
understanding of the principles, so that they 
will be producers all the time, instead of only 
part of the time. 

To get at these fundamental or basic princi¬ 
ples of industry we must go back to the be¬ 
ginning of industry; just as in studying our 
job we found it necessary to go back to the 
beginning. 


Work Existed in Primitive Days 

Primitive man had no seven o’clock whistle, 
neither did he have a weekly pay envelope. 
He had to get out and hustle for his daily 
wants, for the game which supplied him with 
meat and clothing, and for the wild vegetables 
and fruits which nature provided for the pick¬ 
ing. But the supply was not regular, and he 
had to work for what he got. Hunting and 
fishing are work when we have to do it to live. 

History teaches us that man moved from the 
stage of the caveman’s existence when he 
learned to lay something by for the morrow. 
When men went out with clubs and sticks to 
get their food, they would, if luck was good, 



WIIAT IS PRODUCTION AND WHY? 


15 


have a great feast. Sometimes famine came 
before the feast got started because private 
property was not recognized nor respected. 
Force was the only law. When force governs, 
nobody cares to store up, not knowing when 
the strength of an opponent will snatch away 
all that he has laid by. 

Men saw in time that such an existence was 
not worth while, so they organized to protect 
their possessions. With safety came foresight 
and enterprise. Men not only stored up what 
they made or grew, but they found a way to 
get some of the things they needed by making 
or growing a surplus in excess of their own 
needs and by trading this with others who 
were likewise making or producing a surplus 
of other products. Therefore, one family or 
group devoted its efforts toward raising wool 
and spinning and weaving it into cloth which 
they traded to the hunter for meat or to the 
fisherman for fish. Each was beginning to 
do the kind of work he liked best and could 
do best. This was the beginning of trade and 
production. 


The Beginning- of Business 

Gradually the people became more specialized 
in their work; one family raised the wool, an- 



16 


MODERN FOREMANSHIP 


other carded and spun the thread, and still a 
third wove it into cloth. Their production 
was practically all surplus, as only the weav¬ 
ers could use any portion of their product for 
themselves. This growth of specialization in 
production and in exchange—the beginning 
of business—is known as the “domestic sys¬ 
tem.^ 

The fisherman had no use for wool or thread, 
nor could he use more than a small amount of 
cloth, so he had but little direct exchange. 
Similarly, much of the work that we do would, 
alone, be of no value to us. % To complete these 
exchanges and see that each obtained what 
he needed for what he produced, trading agen¬ 
cies or corporations—the forerunners of mod¬ 
ern sales organizations — were organized. 
These would take the wool, thread, or cloth 
and give food and other necessities for them. 

Limitations of the “Domestic System” 

The period from shortly before the discovery 
of America to about 1750 was given over to 
rapid growth of the domestic system. In this 
period the production per individual was 
small, as it was restricted to what each indi¬ 
vidual could produce by hand or by the aid 
of crude, foot-driven equipment. 




WHAT IS PRODUCTION AND WHY? 


17 


During the period of the growth of the domes-, 
tic system the organization of the exchange or 
bartering groups became strong. This was 
the forerunner of our system of sales organ¬ 
izations. In the meanwhile the workers were 
producing all they could by hand. Cloth was 
expensive, even tho labor was cheap, because 
it took a large amount of work to produce 
cloth. The people could not afford to pay much 
for cloth, because they did not have the money 
to pay or its equivalent to trade for it. This 
shows how the ability to pay—the amount of 
money people have—affects the price things 
can be sold for. When prices get too high, the 
people do not buy, they use what they have 
longer and more carefully. 

The Beginning of Modern Industry 

But great industrial changes were taking 
place in Europe about 1750. Men began to 
invent machinery to do the work formerly 
done by hand. As cloth was a necessity which 
required long, tedious iiours to make, it was 
but natural that the first inventions were in 
connection with the spinning of thread and 
the weaving of cloth. Thus we have Har- 
greave’s “spinning jenny,” invented in 1764. 

This was quickly followed by improvements 




18 


MODERN FOREMANSHIP 


and additional inventions, until in a short time 
the entire process of making cloth was done 
by machinery. These first machines were 
operated by water power, and so were located 
on streams at waterfalls. The invention of 
the steam engine by John Watts in 1782 made 
it possible to operate these machines any¬ 
where. 

Many other inventions followed rapidly, which 
changed the system of producing from what 
we called the domestic system, where each 
home was the workshop, to the modern indus¬ 
trial or factory system. These machines were 
too large and expensive to put in the home. 
They must also be located where either steam 
or water power could be procured which could 
drive several machines practically as easily 
as one. Thus several machines were grouped 
in one building, which was the beginning of 
the factory. 

What Modern Industry Brought 

The growth of the factory system did not pro¬ 
gress smoothly, however. Some men did not 
think straight on these industrial subjects 
which were brought up in connection with the 
new conditions. Altho those arguments 
brought up over a hundred years ago have 



WHAT IS PRODUCTION AND WHY? 


19 


proved themselves false, similar arguments 
are still met by the modern production execu¬ 
tive. 

The principal thought in a worker’s mind, 
then as now, whenever any change in the 
method of doing work is suggested, is, “How is 
this new thing going to affect me and my job?’’. 

The weavers saw one man producing more in 
a day with a machine than they had been able 
to do in several days. They saw cloth getting 
cheaper until they could not afford to make it 
in the old way and compete w T ith the machine- 
made cloth. 

Someone told them that just a few men with 
machinery could produce all that could be used, 
and that skilled artisans would have nothing 
'to do. They were told that there would be an 
overproduction and no one would buy the sur¬ 
plus. This condition of affairs caused riots, 
and many mills and machines were destroyed. 
But they were rebuilt and in increased num¬ 
bers. Why? Because the men who thought 
this did not think far enough. 

The Result of Increased Demands 
They did not stop to think that if more cloth 



20 


MODERN FOREMANSHIP 


were produced at a lower price more cloth 
would be used. Soon, instead of being a lux¬ 
ury to the rich, cloth became a necessity to 
the poor. More and more cloth was required, 
which called for increased numbers of ma¬ 
chines and more men to operate them. 

Soon the men who had slaved long hours to 
produce a small amount of cloth had become 
machine operators and were producing yards 
of cloth daily, and they were receiving more 
for their work than ever before. 

If these men had thought far enough ahead, 
they would have seen that the result would 
have been just what it turned out to be be¬ 
cause of the industrial law that as the things 
men want become easier to get and less ex¬ 
pensive, men demand more of them, until what 
has been a luxury becomes a commonplace ne¬ 
cessity. For example, two hundred years, ago 
watches and clocks could be obtained only by 
kings and the very wealthy. Now they are 
necessities to all and within the reach of all. 

We have seen how this industrial law worked 
out with cloth and watches. It was just as 
true with the change from the traveling shoe¬ 
maker to the modern shoe factory. Automo¬ 
biles, electricity, telephones, and many other 




WHAT IS PRODUCTION AND WHY? 21 


indispensables are some of the industrial 
growths and developments due to this indus¬ 
trial principle. 

Increased Demand Requires More Work to Satisfy It 

Another point overlooked is that as the de¬ 
mand for any article increases, more men are 
required to make it. More operators are em¬ 
ployed in the textile, the shoe, the automobile, 
and many other industries at increased wages 
than there were when these products were 
difficult to obtain, expensive, and laboriously 
made by hand. 

Labor-saving equipment, opposed by some for 
similar reasons, follows the same principle. 
It would be absurd to think of a hod carrier 
carrying a hod of bricks to the top of a twenty- 
story building. Labor-saving equipment has 
made the construction and use of tall build¬ 
ings possible. In just the same way machin¬ 
ery made the universal use of cloth, shoes, 
watches, and many other common necessities 
possible. 


The Factors of Production 

Two of the most important industrial changes 
which accompanied the transition from the 




22 


MODERN FOREMANSHIP 


domestic system to the factory system were 
the introduction of machinery, as has been 
explained, and the separation or subdivision 
of the factors of production into what are 
known as land, capital, labor, and manage¬ 
ment. These names sometimes stir up resent¬ 
ment in those who do not think straight or 
who are misinformed as to the reason for their 
existence, relation, and purpose. 

Of these basic production factors, “land” is so 
essential and commonplace that production 
men usually omit it when ordinarily referring 
to production. In speaking of “land” as a 
factor of production, we mean not only the 
land we walk or build on, but all nature’s re¬ 
sources, such as climate, wind, tides, rainfall, 
minerals, stone, forests, natural light, water, 
and air. Some of these resources are used in 
producing everything. Because of the confu¬ 
sion in our minds when we refer to “land,” we 
will speak of this basic production factor as 
“nature’s resources.” 

In industry, nature’s resources are provided 
or utilized by capital, labor, and management, 
the three production factors about which most 
of our misunderstandings arise, and so most 
of our discussion will be devoted to them. 



WHAT IS PRODUCTION AND WHY? 


23 


Getting a Surplus 

The first of these production factors we shall 
take up, is capital. Perhaps because it is so 
little understood, a discussion of capital is 
usually received with antagonism. 

When a man produces for himself only and for 
his immediate needs, he is just about where 
the cave man was. He is near hunger, cold, 
and possibly death, every day. No family life 
can thrive. When the Eskimo gets up in the 
morning, he starts, not where he left off the 
night before—he begins all over again. Every 
day is just like another with him, a ceaseless 
struggle with nature single-handed, and in a 
sense, barehanded. Every man is for himself, 
because there is little teamwork and never any 
real surplus. Without a surplus there is no 
protection against the day of shortage and 
against old age. 

What a Surplus Does for Us 

There is no real wealth in the Eskimo’s exist¬ 
ence. There never can be wealth—by which, 
we mean that surplus which spreads over long 
periods, regardless of good luck or bad luck— 
so long as men work for only the necessities 
of the day with few tools, poor tools, or no 
tools, with no exchange of products, and with 




24 


MODERN FOREMAN SHIP 


no organization which keeps going while they 
sleep. In order to keep from ruin, men have 
slowly learned to exert themselves beyond the 
point where they are merely fed, clothed, or 
sheltered. 

Finally, men began to use their spare time or 
their extra product in order to get those things 
which they could not or did not make. In 
such ways wealth began to grow, and men got 
beyond the animal stage of life. Their ad¬ 
vancement began the moment they set out to 
produce beyond their own needs; that is, when 
they began to work for a surplus. 

Security Brings Savings 

We must not get the idea, however, that our 
ancestors learned their industrial economics 
easily. They surely did not. For a long, long 
time men lived in the state of fear of losing 
what they had saved, until they could back 
up the commandment “thou shalt not steal” 
with an effective exhibition of strength of their 
own. All that our laws, our courts, our in¬ 
stitutions, and our city, state, and federal gov¬ 
ernments are trying to do for us is to protect 
us against violence and robbery while we arc 
at work for ourselves, for our families, and 
our fellow men. 



WHAT IS PRODUCTION AND WHY? 


25 


If you have two suits of clothes, you do not 
expect that a gang of tramps will be allowed 
to break in on you and tell you that you 
shouldn’t have more than one suit for yourself. 
You have the idea that you alone have the 
right to settle this question. If you have a 
bicycle that you use in going to and from your 
work, you feel sure nowadays, and certainly 
in any country with a good government, that 
the whole strength of the nation is back of you 
in preventing any man from taking it away 
from you without your consent, and in punish¬ 
ing him if he should. And this holds good for 
your tool chest, your farming implements, 
your horses, your cattle, your furniture, your 
savings, your dwelling house, and your shop. 

All these things are the wealth, the surplus, 
of the people, which is used in part to make 
more wealth and more surplus, in order to 
meet the growing wants of the human race. 

If we tamper with this wealth, if we squander 
it or seize it without paying for it, it all comes 
to the same thing, we push ourselves back 
to the Eskimo’s and the cave man’s level. 

If we take proper care of our wealth, our sur¬ 
plus, our capital, we have taken out the only 
insurance that is any good against the future. 




26 


MODERN FOREMAN SHIP 


Why Money Is Used 

If you want the farmer’s wheat, you must give 
him shoes, tools, clothing, or the things that 
mean just about the same amount of effort and 
value that has gone into the wheat you require 
of him. At the present time not much barter¬ 
ing is done with the actual commodities we 
produce. If there were, a shoemaker, for ex¬ 
ample, would have to find a butcher who would 
supply him meat and who wanted his shoes. 

As a convenience, or, as one man calls it, a 
“labor saver,” we use money instead. We re¬ 
ceive money for our work, which we exchange 
for what w T e want. The advantage of a type 
of money as a convenience in making ex¬ 
changes was recognized in ancient times and 
is also used by most savage tribes. The In¬ 
dians used strings of beads or shells; the early 
settlers used tobacco or furs, to which they as¬ 
signed a value. 

Modern money represents an assigned value 
which is guaranteed by the government. Most 
gold coins contain practically their full value 
in gold. Silver coins seldom contain their full 
value in metal. The paper in paper money has 
no value. But we accept all these each day 
without question, because they have the stamp 



WHAT IS PRODUCTION AND WHY? 27' 


of the government, which says that it will 
accept this gold or silver or paper token at the 
full value stamped on it. Because the gov¬ 
ernment in this way guarantees the value of 
this token, it keeps to itself the right of mak¬ 
ing or coining money. 

Why We Need Capital 

Under the domestic system, the individual 
workers owned their few tools. As soon as 
they finished carding and spinning the wool, 
they exchanged the thread for food and other 
necessities and for a new supply of wool. 

When larger numbers of men and machines 
were grouped together in the modern factory, 
larger supplies of wool were required. In 
modern industry, materials must be brought 
from foreign countries. Also the buildings 
must be constructed and the machines and en¬ 
gines built. The product may not be sold for 
some time; it may be years before it is paid 
for, or in some cases it may require several 
weeks or months to make. In the meantime 
the men must be paid for their work, coal and 
other supplies must be purchased to keep the 
shop going, and raw materials must be gotten 
in stock to work on. 





28 


MODERN FOREMAN SHIP 


To do this requires capital. To find out what 
capital is, it may be well to begin by telling 
how capital originated and is built up. 

What Is Capital? 

The first forms of wealth, when people began 
to live together for security and neighborli¬ 
ness, were in the form of cattle, kept for in¬ 
crease and for trade. Before this, cattle would 
be killed off as necessity demanded, for food 
and skins, and therefore they could not be 
said to represent property in a real sense, and 
certainly not capital. 

When cattle were kept against the day of 
shortage, to avert famine, and in order to 
trade for the things that other tribes had, they 
stood for capital, and commanded a price, 
often a good price. People were glad to pay 
for the prudence that had saved up the food 
supply in the form of cattle, because such sav¬ 
ing meant taking risks and perhaps putting 
off the pleasure that might come from having 
an immediate feast. 

Capital, as we commonly speak of it, is a part 
of our surplus or wealth which is set aside to 
be used in production. Capital is necessary 
before we can start an industry, and we can 



WHAT IS PRODUCTION AND WHY? 


29 


get it only from those who have saved it and 
have it to loan or invest. 

When a man works and saves some of his 
money, he is building up a surplus or storing 
up something which represents the value of 
his work. When he invests this surplus of 
stored-up work, he is merely putting it to work 
for him. When we bought bonds during the 
War, we were investing—putting to work our 
money which we received for work. This in¬ 
vested money brought in its wages, or as we 
called it, interest. It also financed more work. 

Capital must come from something and rep¬ 
resent something. It is not possible to create 
it out of nothing. 

Putting Our Savings to Work 

Where nobody saves, there can be little or no 
capital with which to start a business. To keep 
your money at home is to run the chance of 
having it lost or stolen. Besides, it does no 
good unless it goes to work for you and for 
your community. When your money is put 
to work, it gets into action by hiring labor and 
ability to increase wealth. Money alone is a 
dead thing. When money works for us, it is 
also helping to give work and jobs to others. 



30 


MODERN FOREMANSHIP 


We Work for Others Who Work for Us 

When we produce, we do so for hundreds and 
for thousands all over the world, and they do 
the same for us and for others. The primi¬ 
tive man produced for himself alone. The 
modern workman produces for all mankind. 
We are truly working for one another and we 
depend upon each other. No man can ever do 
justice to his fellows, unless he gives them the 
best work of which he is capable. If we do poor 
work, we are really trying to get a loaf of 
bread from the baker for less than he is en¬ 
titled to receive from us. The only just return 
we can make to those who are busy for our 
comfort is to turn out good value in the things 
they buy from us—the things we make for 
them. 

In the domestic system, as explained, each 
worker owned his tools and the raw material 
which he needed, and his home was his work¬ 
shop. 


Why “Capital” Is Necessary 

With the introduction of the factory system, 
which required special buildings, expensive 
machinery, and the holding of larger quanti¬ 
ties of raw material and finished products, 



WHAT IS PRODUCTION AND WHY? 


31 


there came new requirements of ownership. 
To provide these required the investment of 
savings. 

Often one man was not able to supply all the 
investment required to start or “found” a new 
business, buy the material, pay the rent and 
wages, and keep it going until he obtained cus¬ 
tomers and collected for his production. He 
sometimes took a few other men in with him 
and formed a partnership. 

In a partnership, each partner has invested a 
definite amount of money and is actively in¬ 
terested in the operation and control of the 
business. Also he is responsible, not only to 
the amount of his investment, but to the ex¬ 
tent of his total wealth and property for all 
obligations of the partnership. 

However, as the organization grows and needs 
more capital, the partners have to interest ad¬ 
ditional investors. These men may wish to 
risk a few hundred or thousand dollars in a 
business even tho they are at work elsewhere 
and cannot watch the use of their investment. 
At the same time they do not care to risk, as 
they would in a partnership, losing their home 
and other property if mismanagement or dis¬ 
honesty of any of the partners runs the com- 



32 


MODERN FOREMANSHIP 


pany heavily into debt. If investors desire to 
limit their responsibility, organizations known 
as corporations are formed. 

What Is a Corporation? 

A corporation is an organization which acts as 
the representative of the investors in its con¬ 
trol of a business and also limits the amount 
of the responsibility of the investor to his in¬ 
vestment. If the corporation fails, the inves¬ 
tors lose only what they have invested. In a 
corporation, each investor, instead of directly 
stepping into the active control of the busi¬ 
ness, elects representatives called “members 
of the board of directors” to represent him for 
a definite time in its operation or manage¬ 
ment. 

The board of directors elects the more impor¬ 
tant officers, such as the president, secretary, 
and treasurer. These officers take over the 
active control of the corporation and appoint 
associates who hire the remainder of the force. 
The officers are responsible to the board of di¬ 
rectors. The board in turn is responsible for 
the acts of the officers they appoint. 

Three or more investors can form a corpora¬ 
tion instead of a partnership, if they prefer. 



WHAT IS PRODUCTION AND WHY? 


33 


In a corporation of only a few investors, how¬ 
ever, the investors usually elect themselves to 
the more important offices and dispense with 
the board of directors. 

How the Investor Is Represented 

Unless the investor is satisfied with the work 
of the directors, he need not reelect them. 
Thus the investor can indicate his pleasure or 
displeasure in the actions of his directors in 
the same way that he approves or disapproves 
of his representatives in control of the city, 
state, or national government when they come 
up for reelection. 

These individual investors are called stock¬ 
holders, as they hold or own “stock” represent¬ 
ing shares in the total amount invested in busi¬ 
ness. The stock is represented by a certificate 
which indicates the value assigned to the in¬ 
vestment. Shares of stock usually represent 
investments of $10, $50, or $100. A stock¬ 
holder shares in the profits according to the 
amount of his investment, as announced by 
the board of directors, and is paid in the form 
of dividends. When there are no profits, there 
are no dividends. The real or market value 
of the shares of stock rises or falls largely ac¬ 
cording to the dividend rate paid. 



34 MODERN FOREMANSHIP 


When More Capital Is Needed 

Frequently a company after it is organized 
finds it necessary to get additional money. 
This it does either by increasing the amount 
of the stock issued and selling it, or by borrow¬ 
ing the money on its security. In borrowing, 
you will notice a close similarity to the way 
an individual borrows money. If small 
amounts are wanted for a short time, the 
money is generally loaned by the bank on notes 
signed by the officers of the company. Short¬ 
term loans of this sort are made to finance 
special jobs from the manufacture to collec¬ 
tion, or for other temporary needs of money. 

Whenever extensive improvements, as new 
buildings and similar large expenditures, are 
planned, the loan is made on the security of a 
mortgage, and for a period of several years. 
The individual borrows to pay for his home 
in much the same way. In industry, however, 
whenever the loan is larger than one individ¬ 
ual is able or desires to make, it is divided up 
into many small amounts or “bonds,” which 
can be taken by numerous individuals who 
wish to loan a part of their savings or surplus. 
Common practice has made the amount of 
these bonds $100, $500, $1,000 and $10,000. 
This fits the loan to any man’s pocketbook. 



WHAT IS PRODUCTION AND WHY? 


35 


The Difference between Bonds and Stocks 

Since, in the minds of many not familiar with 
financing, there is considerable confusion be¬ 
tween a bond and a share of stock, it will pay 
us clearly to differentiate them. A share of 
stock represents a definite portion of the actual 
ownership of the corporation. The investor 
has risked his money in this enterprise and 
stands to lose all. A man with $10,000 in 
stock in a concern of $100,000 total stock owns 
one-tenth of it. He, therefore, should receive 
10 per cent of the profits when divided. Also 
he can cast 10 per cent of the votes when the 
board of directors are elected. 

A bond, however, represents a different 
kind of a loan made to the concern. The 
ownership of a $1,000 bond shows that its 
owner has $1,000 loaned, altho the whole loan 
or bond issue may be hundreds of thousands 
of dollars. The bondholder does not own any 
share of the corporation and has no control 
of its policies or methods, excepting in emer¬ 
gencies. Bondholders, however, must be satis¬ 
fied first in cases of business embarrassment. 

On this bond they receive a definite rate of in¬ 
terest, say 6 per cent or more. After this in¬ 
terest is paid out of the profits, the board of 



36 MODERN FOREMANSHIP 


directors divide up the remainder among the 
stockholders. Wise managements, however, 
lay by a surplus of these profits so that they 
can have something to draw on in case of an 
emergency. A surplus for an emergency is 
just as necessary for the concern as for an in¬ 
dividual. 

As corporations have increased in size, the 
number of people investing in them has in¬ 
creased until, for example, 120,000 investors 
are stockholders in the Pennsylvania System. 
Over 100,000 of these have less than $5,000 
each invested. This and the large bond issue 
outstanding give a widespread interest in the 
company. 

Many companies are giving those on the pay 
rolls an opportunity to buy stock and become 
investors in the company with which they 
work. Each of these investors, even tho he 
owns but one $50 share of stock, is a capitalist. 
His money helps make the enterprise possible 
and enables it to remain in operation. Pro¬ 
viding the money is the function of the capi¬ 
talist. 

Why Capital and Labor Need Each Other 
But capital alone does not make a factory. It 





WHAT IS PRODUCTION AND WHY? 


37 


merely provides the buildings, the machinery 
and the money necessary. Before the factory 
can produce, however, there must be men— 
labor—to operate the machinery and work 
up the raw material into a finished product. 
Also, obviously, labor without the machinery, 
buildings, and other factors would be handi¬ 
capped in producing. Alone, it would be back 
in the old domestic system. 

Capital and labor, as we know them, have a 
common purpose—production. One cannot 
get along without the other. Labor also must 
work with labor. Each man is interdepend¬ 
ent with others and with capital, and all must 
work together for the common purpose—pro¬ 
duction, and to make the best use of nature’s 
resources. Any factory executive knows the 
large amount of misinformation existing in 
reference to the importance and relation of 
labor and capital. One example shows the fal¬ 
lacy of some of these arguments. 

A coal miner who digs a ton of coal does not 
create the coal, and not the whole ton belongs 
to him. Altho he receives about 90 cents for 
mining the ton, the miner cannot maintain 
that he should receive the $3.00 that the ton 
of coal brings when loaded on the railroad cars 
simply because of the fact that without his 




'38 


MODERN FOREMAN SHIP 


efforts the coal would have remained in the 
mine. Of course part of this is true, but with¬ 
out the assistance of the man who hauled the 
coal to the base of the shaft, the engineer who 
hoisted the coal to the surface, and others, the 
coal would have remained in the little “room” 
where it was dug. 

This miner must take into account the impor¬ 
tant place capital occupies. How would he 
have ever gotten to the ton of coal if capital 
had not dug the shaft several hundred feet 
down and then extended the galleries perhaps 
miles back to where the coal was dug? Capi¬ 
tal supplied the mine “tipple” and engine 
which hoisted the coal to the surface. Capital 
pays the wages regularly whether the coal is 
sold and collected for or not. Capital also 
keeps the mine in condition to operate. 

So it is that each group of labor is dependent 
on the other and on capital. Another factor— 
management—is also necessary, as will be ex¬ 
plained later. 


Why Work Is Necessary 

We all know how necessary work is if we are 
to receive any benefit from nature’s store¬ 
house full of resources. It is only when the 



WHAT IS PRODUCTION AND WHY? 


39 


ore is turned into steel or automobiles, clay 
into dishes and homes, trees into furniture or 
paper for books, and wheat into bread and pas¬ 
try that we can make use of it. Also when we 
use the result of our work—as eat our bread 
or break our dishes—we have to provide more 
to take its place. This requires more work. 

Will the “Labor Reservoir” Get Empty? 

Some men advance the false theory that we 
had better “slack up” on our work or shortly 
we shall have so much of everything on hand 
that there will be no more work to do. They 
maintain that there is only so much work in 
the world and that if we do too much the “labor 
reservoir,” as they call it, will become empty 
and there will be no work to do. But the labor 
reservoir is constantly being filled by new 
wants and new desires. It is like the lakes 
and seas — nature’s reservoirs — which are 
filled by the rivers and streams which run 
into them. Water in nature’s reservoir may 
evaporate, but it forms clouds, then rains, and 
so refills the reservoirs. In the same way our 
clothes wear out, our dishes break, and our 
children want new houses for themselves. 
Each new desire or need helps refill this labor 
reservoir—it is a shop order for more work. 



40 


MODERN FOREMANSHIP 


An old proverb which sizes up human nature 
pretty well runs, 4 ‘The more you have, the 
more you want.” It doesn’t look very much 
as tho this labor reservoir would be exhausted 
soon with human nature as it is, does it? 

Most of us do not want to cheat our fellow men, 
but will put our best into our work. But we 
find that for all our good will and skill, some¬ 
thing more is needed before the result of our 
effort and before the outlay of money can go 
very far. That something more is manage¬ 
ment. 


Why We Have Management 

If we take away management, we have cut the 
head from the body; all intelligent movement 
comes to an end. There may be some squirm¬ 
ing which looks like movement, but it isn’t any¬ 
thing that will go forward much. 

There is a mighty good reason, isn’t there, for 
giving management all the support possible 
and fairly large rewards? Good executives 
are the final factors which settle the fate of 
any venture. They make possible the large 
growth of modern industry, because they have 
the vision and also the courage and the skill to 
tackle the job of putting that vision into ac¬ 
tion. 



WHAT IS PRODUCTION AND WHY ? 


41 


Management is not merely those members of 
an organization identified by a high salary or 
the title of manager, nor only the men who 
may be holding what we call executive posi¬ 
tions and directing the business. Management 
includes the plan or policy to be used in direct¬ 
ing a business. In other words, isn’t manage¬ 
ment the thinking, planning, and controlling 
end of a business? 

The executives in control of the management 
of a manufacturing organization, for exam¬ 
ple, find it necessary to decide its policy on im¬ 
portant problems in connection with the work. 
Policy problems differ from the routine pro¬ 
duction problems concerning what shall be 
worked on any day and who shall do it. 
Summed up in a few words, a policy problem 
affects the shop as a whole, while production 
or personnel (man) problems affect only the 
individual or closely related groups of indi¬ 
viduals or gangs. 

Every veteran production man understands 
this necessity of a management deciding all 
policy questions and to a certain extent the 
production problems. He knows that such 
questions as which order shall come out first 
and whether to add a building, are not ques¬ 
tions for him to decide on his own judgment 



42 


MODERN FOREMANSHIP 


only. Obviously these questions could not be 
left to the workmen to decide, but must be 
left to the management. 

What Is Management? 

Here is what an able man, of long experience 
with different kinds of industries and man¬ 
agers, has been saying lately about manage¬ 
ment and what it covers. The production ex¬ 
ecutive who keeps his words in mind will get 
a good picture of the subject, something that 
will serve him in good stead whenever he meets 
with misunderstandings as to the importance 
of capable executives in any and every kind 
of enterprise. Nothing will help the rank and 
file appreciate the value of good organization 
or management better than a clear picture in 
the foreman’s own mind of just what such or¬ 
ganization or management actually is respon¬ 
sible for. The management’s picture is given 
in Fig. 2 as the above-mentioned authority 
sketches it. 

Sometimes workers believe they could get 
along without management. However, prac¬ 
tically every veteran production man knows of 
instances where companies have tried to get 
along with the next thing to no management— 
poor management. In these cases the com- 






WHAT MANAGEMENT INCLUDES 


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0)3 

0 ^ fcO^ 

C/3 g g ^ 

^ a os <d 
o w 


4-> 


o ^ be 

> o g 


ri -J 

“o2g 
3 3 

<?s 


. . <D 
O G> 




Fig. 2.—Management’s main purpose is to keep the organization operating properly. In this, management’s duties may be subdivided 
into these five elements which must co-ordinate and function together. Because of the great responsibility, management commands 

an appropriate reward. 








44 


MODERN FOREMANSHIP 


panies were soon out of business, and the men 
had to find a new place to work unless a new 
management came in and put the concern on 
its feet. The management alone is responsi¬ 
ble for many factors in connection with pro¬ 
duction which will put the company out of 
business in a short time unless they are prop¬ 
erly handled. This is well shown by records 
of failures which place a large proportion of 
the responsibility directly upon the manage¬ 
ment or within its activities. 

Some of these factors which require such close 
watching by management are: amount of raw 
material, work in process and finished parts 
on hand, sales, collections, bills for sup¬ 
plies, material and incidental expenses, cash 
to meet the pay roll, competitor’s prices, 
obtaining work for dull seasons, supplying 
buildings, obtaining machinery and men, and 
many other points. Practically all these are 
considered by the men out in the shop as in¬ 
cidentals to the operation, if they are even 
considered at all. However, the neglect of 
any of these or many other important factors 
will put an organization into serious difficulty. 

Who Appoints the Management 

The management is placed in control of the 



WHAT IS PRODUCTION AND WHY? 


45 


business by the investors. Altho the invest¬ 
ors actually appoint only the higher execu¬ 
tives, every man in the organization is the 
representative of the investors. In many 
cases, especially in small concerns, the invest¬ 
ors or owners are the management. The 
management must make good, just the same 
as the workman at the bench, if it expects to 
retain its position. The management is, there¬ 
fore, responsible to the investors and is ex¬ 
pected by them to exercise care and judgment 
in handling the property or plant. This rela¬ 
tion and responsibility of money, manage¬ 
ment, and men is indicated by Fig. 3, which 
indicates how closely they are related. Man¬ 
agement overlaps into both money and men. 

This diagram also indicates the important 
place the foreman takes in the industrial or¬ 
ganization ; he is the part of the management 
which ties it up with the man. This gives 
him the greatest opportunity to influence his 
men in their work, in their thoughts, espe¬ 
cially those concerning the shop, and even to 
a large extent in their actions. 

The president or board of directors is at the 
other end of the management group. In be¬ 
tween are the various other executives, as is 



46 


MODERN FOREMANSHIP 


easily seen by a study of practically any in¬ 
dustrial organization. 



Fig. 3.—One of the common mis¬ 
conceptions of industry is that 
capital, labor, and management 
not only are separate production 
factors but that they have noth¬ 
ing in common. This diagram 
shows not only that capital and 
labor are tied together by man¬ 
agement, but that the functions 
and responsibilities of manage¬ 
ment overlap, as shown by the 
eclipse, and become a part of both 
capital and labor. This explains 
why the foreman is such an im¬ 
portant link between the man¬ 
agement and the workers. When 
the workers buy stock in the con¬ 
cern, they then become investors 
and so are within the circle 
marked “capital.” In small plants 
where one man owns the business 
and also acts as foreman and 
manager, the “capital” circle 
completely eclipses. Where he 
does the work also, as in many 
one-man plants, the three circles 
become one circle. 


What Makes a Man an Executive 


Many think of an executive as merely a job 
holder, but an analysis of his work shows him 
to be much more. The foreman is an execu¬ 
tive, and the worker at the machine or bench 

























































WHAT IS PRODUCTION AND WHY? 


47 


can be one if he so wishes. Let us see, there¬ 
fore, what an executive is. Many confuse 
the term executive with that of management. 
An executive is one of the personnel of the 
management. 

Primarily an executive is a man who coordi¬ 
nates and works out the ideas of others. But 
to be a really valuable executive he must orig¬ 
inate his own ideas and put them into prac¬ 
tice. Many men are able merely to follow out 
the ideas of others but are unable to add ideas 
of their own or to put them into practice. It 
is largely thru our ability to add and apply 
our own ideas to those of others that we ad¬ 
vance. Veteran production men are always 
looking for men with ideas of their own who 
can be taken on as understudies, so as to have 
men ready to step into their own positions 
when the opportunity opens in a better depart¬ 
ment or when the position of superintendent 
is open. 


Headwork vs. Handwork 

This description of an executive brings up an¬ 
other important factor—the discussion of the 
relative importance of headwork and hand¬ 
work. Some say that only handwork is worth 
considering, as it is the “creative work.” Let 



48 MODERN FOREMANSHIP 


us see how this theory applies to the foreman’s 
job. 

The foreman is more of a headworker than a 
handworker, altho generally he is able to “get 
his hand in” when necessary. But if he spent 
his time at one machine or bench, he could see 
only that the output of that one machine or 
bench was kept up to full output—that it pro¬ 
duced all that it was capable of. However, 
by directing the handwork of others, by see¬ 
ing that each machine is supplied with some¬ 
thing to work on and each man with some 
work to do, and that each does his work prop¬ 
erly, quickly, and well, the veteran foreman 
is able to get more out of his department than 
he could if he “pitched in” with his hands. 


How Eeadwork Reduces Handwork 

But ideas, or headwork, are not limited to di¬ 
recting or managing only. Ideas which result 
in machines doing work much quicker and 
much cheaper save the work of many men and 
enable us to get what we need at lower cost. 

Ideas, however, are not restricted alone to 
building new and better machines which re¬ 
duce the effort or the hours of work, or make 
the work more agreeable, and so lower the 




WHAT IS PRODUCTION AND WHY 1 


49 


cost of doing the work, which in turn enables 
us to buy the product cheaper. 

Ideas can be used anywhere, even in our sim¬ 
plest tasks. One foreman, at the suggestion 
of one of the workers, moved two benches to¬ 
gether. The work was then lifted two or 
three feet from one man to the next, instead 
of having to be carried thirty feet from one 
bench to the next. A little idea, indeed, but 
it had a big effect upon the convenience of do¬ 
ing the work and on the output. 

Getting- the Men to Thinking 

When a production executive gets his men to 
thinking, he is putting heads to work in addi¬ 
tion to hands. The best results come where 
heads and hands both work. For this reason 
many executives have found that it pays to 
encourage the men to give suggestions about 
their work. These suggestions not only help 
get out the work but often overcome some of 
the production interferences which the exec¬ 
utive with his two busy eyes does not see, but 
which the many men in the shop, each with 
two eyes which do not have so much to look 
after, do see. The men who think and make 
suggestions are also good timber for under¬ 
studies. 



50 


MODERN FOREMANSHIP 


When a man begins to think on the job, he im¬ 
mediately becomes a part of the management 
—he is managing his own job. The ash han¬ 
dler who dumps his first wheelbarrow load 
of ashes so that each succeeding load must be 
wheeled thru it, is not thinking—he is not 
managing his job, and it is causing him extra 
labor. In many other cases headwork makes 
hard work easy. Even on the jobs which many 
executives classify as requiring “a strong 
back,” the work can be made easier by using 
the mind. Making every man a thinker on 
the job makes every man a manager. Train¬ 
ing the worker, as explained in the manual on 
the subject of training, helps make him a 
thinker. 


Problems of Modern Industry 

Up to this time we have discussed the numer¬ 
ous industrial changes in the transition from 
the domestic to the factory system. We saw 
how the workers came to be grouped together 
operating machines in a factory instead of 
each working in his own home on crude foot- 
power devices. Along with this change came 
greater conveniences, and many of the former 
luxuries, thru the greater ease of making, be¬ 
came necessities. Our whole mode of living 
has changed on account of this. 



WAGE EARNERS 

PER 

ESTABLISHMENT 
NONE 
1-5 
6-20 
21-50 
51-100 
101-250 
251-500 
501-ipCO 
OVER 1,000 

WAGE EARNERS 

PER 

ESTABLISHMENT 

1-5 
6-20 
21-50 
51-100 
101-250 
251-500 
501-1,000 
OVER 1,000 




NUMBER OF ESTABLISHMENTS 


400 


22,900 


6.500 

a 3,10 

3 1,300 
6SO 

NUMBER OF WAGE EARNERS 

O 500,000 1,000,000 1,500 ,000 


U.S. CENSUS REPORT 


743,000 


600 


Fig. 4.—This shows how the wage earners are divided among the various 
industrial establishments producing over $500 in a year. Since almost two- 
thirds of these employ five men or less, there still exist many opportunities 
to become a business man. This shows that industry is not all big plants, 
for only 2 plants out of every 1,000 employ over 1,000 men. In those 32,856 
plants listed with no employes the proprietors do all the work. 



































MODERN FOREMAN SHIP 


One of the most important changes has been 
in the introduction of the modern subdivision 
into what we so commonly speak of as cap¬ 
ital, labor, and management, or sometimes as 
money, men, and management. Under the 
domestic system, each worker supplied his 
own capital and managed himself; but, as we 
saw, his output was limited by his ability and 
his poor equipment. 

The Bringing Together of Men and Management 

Under the subdivision of industry into these 
three elements, some difficulties have grown 
up which are in many cases exaggerated thru 
wrong thinking or misinformation. One of 
the most important of these is the separation 
of management and men. 

When plants were small, the owner was often 
the manager, the superintendent, and perhaps 
even the foreman. He knew all the men who 
worked for him; he knew their families and 
their personal interests and ambitions, both 
outside and inside the plant. The men also 
knew him, and any dilferences were talked 
over in a friendly spirit. 

How the Management and Men Became Separated 
As the plant grew in size, the owner had to 



WHAT IS PRODUCTION AND WHY? 


53 


get foremen, and soon a superintendent, and 
so lost touch with his men. The financial or 
money control kept him busy. Due to this 
growth, the worker has to take his differences 
up with the foreman, who, to him, is the man¬ 
agement. When the man gets laid off or fired, 
he blames the management. This separation 
or lack of mutual understanding is indirectly 
responsible for many strikes, which are the 
workers’ method of expression. 

Various methods have been used to overcome 
this difficulty. Some executives adopt what 
they call the ‘‘open door” policy—their office 
door is open to any man who wishes to make 
a complaint or a suggestion. Also, a number 
of companies have had remarkable success 
with the shop representative or committee 
plan, where the workers elect representatives 
to meet with the management or its repre¬ 
sentatives and thrash out any differences or 
unhealthy discontent. 

Still another method is thru the organization 
of a personnel department. This department 
takes charge of the employment, transfer, and 
discharge of the men, all welfare work, legal 
advice, and any other assistance to the man, 
which in former times the owner of the small 
business was able to render to him. How the 



54 


MODERN FOREMAN SHIP 


personnel department operates and the work 
it does, is a big subject in itself, which deals 
largely with activities outside of, altho re¬ 
lated to, actual production. 


Understanding- Profits 

Another result of this subdivision into money, 
men, and management is a difference of opin¬ 
ion as to the share of each in the profits or 
the wages of money invested. Each must 
have profits or wages, or it will not be used 
in producing. Labor takes its share imme¬ 
diately in the form of wages and even before 
it is known whether there will be any profits. 
The personnel of the management are usually 
paid in the same way. The investors, how¬ 
ever, must wait until the end of the business 
year to see what their profits, or wages on 
their investment, are. 

Some men even insist that money has no right 
to a profit; that any profit should be divided 
up among the workers. Most workers would 
be surprised to find that if all the profits made 
in the United States were divided up among 
all the workers they would add only a few 
cents an hour to their wages. The total amount 
of profits of a company may seem large, but 
an analysis shows that often they are made 



55 


WHAT IS PRODUCTION AND WHY? 


up of the small profits on the output of each 
worker. This, however, is not the usual 
method of computing profits, but let us see 
just what they become when figured that way 
in the case of the Johnson-Day Company, with 
the following facts about it: 


Capital invested ..$1,000,000 

Profit (including interest). 100,000 

Interest on investment at 6% . 60,000 

Actual profit. 40,000 

Number of workers. 300 

Average number of days employed 250 

Hours per day . 9 


With these facts about the business we will 
get this information about the $100,000 profit. 


Investment per man.$3,333.33 

, Profit per man per day (including 

interest) . 1.33 

Interest per man per day... .80 

Actual profit per man per day. .53 

Actual profit per man per hour 

(not quite) . .06 

/ 

It is surprising to learn that a $1,000,000 


organization making an indicated profit of 
$100,000 a year could not raise the wages of 
its employes six cents an hour without wip¬ 
ing out its entire profits, but this analysis 
shows this condition to exist. 















56 


MODERN FOREMANSHIP 


Wiiy Invested Capital Should Receive Interest 

Perhaps some men will question the 6 per cent 
interest allowance., but from our study of 
savings and capital we can easily see why it 


What Capital Must Invest in Industry 



Capital 

Interest Earned 


Invested 

by Capital at 

Industry 

per $1,000 in 

6 % per $1*000 


Wages Paid 

of Wages Paid 

Chemical . 

.$18,000 

$1,080 

Steel and iron and their manufac- 


ture . 

. 6.000 

360 

Textile . 

. 4,000 

240 

Food . 

.. 8,000 

480 

Woodworking. 

. 4,000 

240 

Paper and printing. 

. 5,000 

300 

Stone, clay, and glass. 

. 4,000 

240 

Miscellaneous . 

. 6,000 

360 

Tobacco ... 

. 4,000 

240 

Metals and metal products other 


than iron and steel.. 

. 6,000 

360 


From U. S. Census Report 


Fig. 5.—How many men ever stop to estimate the amount of investment 
necessary so that they will have a place to work? Examining this table 
shows an average amount of investment per thousand dollars in wages paid 
in your industry. It takes money to provide factories, tools, machinery, and 
material—essentials if men are to have a place to work. 

is justified. Any man who has sacrificed 
and saved some of his money and invested it, 
is entitled to his earnings from it. Other¬ 
wise, why should he save it? If he invests it 
in a factory or business, he is not sure that 
he will be successful or even receive the in- 
















WHAT IS PRODUCTION AND WHY? 


57 


terest return he could obtain with a well-se¬ 
cured investment, such as a home or farm 
mortgage or a bond. Many companies never 
succeed, and those who put their money into 
them, and so give men work, lose all or at least 
a part of what they invested. Because of this 
risk most fair-minded men agree to the jus¬ 
tice of an additional profit over and above the 
natural interest which the investor would re¬ 
ceive from a safe investment. The invest¬ 
ment necessary in various industries for each 
$1,000 paid in wages and the interest that the 
investment earns is shown in Fig. 5. Ordi¬ 
narily, the worker never stops to think of the 
investment in tools, machines, and other essen¬ 
tials which he uses in his everyday work. 
Without them his opportunities would be 
limited. 

In the case of the Johnson-Day Company the 
interest on the investment amounts to 80 cents 
a day per man on the $3,333.33 per man which 
the investors have to put into the business be¬ 
fore he can have a place to work in. But few 
workers could supply that much money to in¬ 
vest in the shop to give themselves a place to 
work. The profit of 53 cents per day per 
man is a little less than 6 cents an hour per 
man. Thus we see that what may appear to 
be a big profit of $100,000 a year means less 



58 


MODERN FOREMANSHIP 


per hour than many men were asking as a 
raise in wages during 1919 and 1920. 

Practically every veteran foreman has heard 
men maintain that corporations were making 
$10 or more a day per man. When the facts 
are worked out concerning any company, these 
statements of such high amounts will gener¬ 
ally be found to be based on the imagination. 

Even tho a company shows a profit of a mil¬ 
lion, it may, and often does, mean a loss, or 
less than the investors could get by more se¬ 
cure investments. The difficulty lies in the 
fact that most people look at the total amount 
instead of analyzing it down to the profit per 
dollar invested and at work, or the profit per 
man. Figure 6 shows how one company spends 
each $100 of income. 

How Production Factors Facilitate Business 

In the preceding pages we have corrected a 
number of the misunderstandings of the prin¬ 
ciples of work or industrial economics which 
have been the cause of unhealthy discontent 
among workers. 

A discussion of these principles, however, 
would not be complete without bringing in 



WHAT IS PRODUCTION AND WHY? 


59 


the close application to modern industry of 
the factors of production—nature’s resources 
(land), capital, labor, and management. Of 
course they facilitate our everyday industrial 
activities, but how? Let us take, for example, 
the little, one-man tailor shop. The tailor, be¬ 
cause of his savings, is able to buy his scis- 


How a Steel Mill Spends Each $100 of Its Income 

Operating expenses (salaries, wages, and general 


operating expenses) .$68.19 

Taxes . 16.67 

Interest on borrowed money and appropriations to 

pay off loans, etc....,. 2.14 

Repairs, renewals, and depreciation, etc. 5.92 

Profit for year (for surplus and dividends). 7.08 


$ 100.00 


Fig. 6.—After deducting expenditures for operation and providing the in¬ 
terest on borrowed money, there remained only $7.08 out of each $100 re¬ 
ceived from the sale of products. In this actual case the disbursements 
for dividends amounted to $5.39 for each $100 of income; the remainder of 
the profits were set aside as a surplus for an emergency. 


sors, needles, sewing machine, table, and other 
equipment he needs. He also buys the thread 
and cloth—his raw material. He rents his 
space. 

The rest of his money is deposited in the bank 
for emergencies. These expenditures and 
savings represent his capital. He does all 
the work of tailoring. He also manages his 











60 


MODERN FOREMANSHIP 


job—that is, he buys, sells, takes orders, looks 
after his financing, looks up more business, 
advertises, and apportions his time to the vari¬ 
ous elements of his work so that the work is 
done properly, on time, and as wanted. 

4 

In this simple industrial establishment this 
one man represents capital, labor, and man¬ 
agement. We meet numerous examples of a 
one-man organization, such as storekeepers, 
shoe-repair men, barbers, doctors, lawyers, 
and others. But in each case where the man 
has to devote his efforts to all activities, his 
business is small. He cannot make it much 
larger alone, because it is impossible for him 
to perform the additional labor which would 
be necessary with the increase in business. 

How a Business Grows 

To increase his business he first adds another 
man to do this additional work. He can then 
devote more time to the management func¬ 
tions—buying, selling, getting more business, 
and other managerial duties. He also would 
have to increase the amount of tools, material, 
etc.—his capital—unless he does not expect to 
do any more tailoring himself. 

As more men—labor—are added, more capital 



WHAT IS PRODUCTION AND WHY? 


61 


is necessary, larger space must be provided, 
and more supervision is necessary. He then 
gets a foreman, who puts in all his time in 
supervising the men, and leaves himself free 
to perform the other managerial duties. 

By this time the financial, sales, and buying 
problems are occupying a considerable amount 
of his time. He therefore gets assistance in 
these lines. In the meantime, the demands 
for additional capital to keep this larger busi¬ 
ness going make it necessary to take in part¬ 
ners with money to invest, or to form a corpo¬ 
ration and sell stock or shares in the business. 
Capital, labor, and management are now en¬ 
tirely separated, and instead of one man in 
a little shop we have a big tailoring shop in 
a special building and employing several hun¬ 
dred people. 

Up to this time we have omitted all reference 
to the other factor of production—nature’s 
resources. The tailor did not shear the sheep, 
nor card, spin, or weave the wool. Consider 
the additional machinery and capital as well 
as the work and skill involved if he had tried 
to do all this. Wool comes to him in the form 
of cloth, coal in the form of heat or power, 
the ore already made into equipment. 



62 


MODERN FOREMAN SHIP 


The Tendency toward Specialization 

We have seen in this example of the growth 
of a little tailor shop into a big industry, how 
the tendency is to specialize and subdivide the 
work according to its importance and the skill 
it requires. All industry, for that matter, is 
specialized. Thus we have coal mines, rail¬ 
roads, steamship lines, woolen mills, sheep 
ranches, lawyers, banks to provide money, 
sales organizations, distributing agencies, 
engineering and industrial consultants, and 
many other specializations to facilitate busi¬ 
ness. 

Each of these operations requires capital, la¬ 
bor (high-grade perhaps), and management; 
but all, as they tie together and function to¬ 
gether, make it easier to carry on business. 
The tailor, for example, can get a wide vari¬ 
ety of cloth in any quantity as he wants it, 
can have it transported on the railroad, can 
arrange with the banks to finance the pur¬ 
chase until he has it made up into suits and 
sells them, can call in his lawyer to see that 
his agreements with these other specialists are 
not to his disadvantage, and can call on many 
other specialists to facilitate his industrial 
and business operations. 



WHAT IS PRODUCTION AND WHY? 


63 


But this industrial specialization is not re¬ 
stricted to facilitating the management in its 
operations, as has been explained in the 
previous paragraphs. An equally important 
change in the handling of the work in the shop 
has occurred at the same time. 


The Specialization of Labor 

For example, the old shoemaker cut and sewed 
each piece of leather to fit one individual. He 
had to pick up the sole leather, cut the sole 
and lay it down, then pick up other rolls of 
leather, untie them, cut the parts for the up¬ 
pers, and then tie the rolls up again. He was 
then ready to sew the shoe together. A large 
part of his time, we notice, was occupied in 
picking up and putting down the rolls of 
leather. As shoemaking became a factory 
operation, some workers began to cut soles all 
the time, some to cut uppers, some to sew up¬ 
pers together, and others to sew the soles to 
the uppers. 

The Advantage of Specialization 

Thus we see how each man, instead of making 
a whole shoe, began to specialize on a few op¬ 
erations. At present this specialization is 
carried out until with one company 195 opera- 



64 


MODERN FOREMAN SHIP 


tions, each performed by a different operator, 
are required to make a pair of shoes. This 
specialization eliminates the waste motion of 
changing from one operation to another with 
a corresponding putting away of one set of 
tools or material and picking up another set. 
An unskilled worker can be trained to per¬ 
form these individual operations rapidly and 
accurately in a short time, while it would take 
months or perhaps years to learn to make an 
entire shoe or suit of clothes or automobile. 

This specialization of labor has been carried 
out in almost all lines of industry until we 
have but few trades in which one man com¬ 
pletely makes a finished product. Some excep¬ 
tions exist in highly skilled work, such as 
model work, tool making, pattern making, 
and, particularly in small shops, fancy cabi¬ 
network. 

Effect of Standardization on Industry 

Closely connected with specialization of labor 
is standardization, or a specialization of prod¬ 
ucts or parts. Probably the best-known ex¬ 
ample of specialization is the manufacture 
of the Ford automobile. In producing the 
four models, practically everything is stand¬ 
ardized. One chassis serves for all and will 




WHAT IS PRODUCTION AND WHY? 


65 


take any one of the four bodies. In this way 
there is less trouble connected with making 
the chassis, as the parts in it are all standard 
also. 

Standardization of parts is carried out quite 
extensively in industry to-day, even tho sev¬ 
eral sizes, models, or styles of the same prod¬ 
uct are made. The cap screws, gears, and 
perhaps some of the other parts, may be de¬ 
signed to fit any of the product. Clothing, 
shoes, and similar products, which require 
variation as to size and perhaps as to color, 
are, however, standardized at least in the 
method of handling in their manufacture. 

Making Parts Interchangeable 

One of the most frequent difficulties in stand¬ 
ardizing any product is in getting it to fit to¬ 
gether quickly and easily. Any veteran pro¬ 
duction man remembers the time when a ham¬ 
mer and a file were necessary in assembling. 
This took time. When it became desirable to 
use specialized labor in assembly, it was nec¬ 
essary to be sure that the parts would fit to¬ 
gether at the first trial. 

The obvious way to do this is to eliminate or 
reduce the variation in size between the parts 



66 


MODERN FOREMANSHIP 


so that all are practically the same size and 
none too big or too small. To accomplish this, 
the method of manufacturing “interchange¬ 
able parts” was adopted. Parts are made and 
inspected within a very narrow limit, some¬ 
times as low as .0003 of one inch. 

The American watch is a good example of a 
standardized, interchangeable-part product. 
When repairs are necessary, a jeweler can 
send to the factory and get a new part which 
will fit. In contrast to this is the Swiss watch, 
which does not have interchangeable parts. 
The repairs for it must be made by hand. 

Standardizing Production Methods 

These changes in production methods would 
naturally lead up to standardizing the meth¬ 
ods of controlling processes. How this is done 
has been taken up in considerable detail in 
previous manuals, which gave some of the shop 
practices of scheduling, dispatching, planning, 
routing, and following up. Thus we have seen 
how standardization has affected not only the 
product manufactured but also the method of 
its manufacture and the handling during its 
manufacture. 

This process of standardizing our method of 



WHAT IS PRODUCTION AND WHY? 


67 


handling a product, which we learned in the 
previous manuals, is commonly known as 
scientific management—the stepping-stone to 
efficiency. 

What Is Efficiency? 

Efficiency consists in doing our work without 
waste of time, motion, or effort. We have 
found thru our experience that by planning 
and scheduling what we are going to do, and 
by planning how, when, where, and with what 
we are going to do it, we can eliminate much 
of this waste motion, time, or effort. That is, 
we approach more nearly perfect production, 
or 100 per cent efficiency. 

In considering efficiency, we must take into 
account the fact that if one man or one ma¬ 
chine is lagging or wasteful the plant is not 
100 per cent efficient. Even if all the other 
men on machines are efficient, neither that 
department, nor the whole plant for that mat¬ 
ter, can be 100 per cent efficient. 

What Efficiency Depends Upon 

But the lack of efficiency of men and machines 
is not alone responsible for industry’s being 
below 100 per cent perfect. Management and 
capital must also be efficient if the organiza- 




68 


MODERN FOREMANSHIP 


tion is to be efficient. Also, they have a great 
responsibility in making labor efficient. For 
example, if management has not standardized 
its methods of handling and controlling labor, 
machines, and material, none of these can be 
efficient. Similarly, if capital on the advice 
of management has provided a building or 
machinery unsuited for the work, then labor, 
even with its best efforts, cannot be efficient. 

In an industrial organization made up of 
many elements of capital, labor, and manage¬ 
ment, the efficiency of each of these elements 
must be carefully controlled to get a good per¬ 
centage of efficiency for the whole. 

Where Competition Helps Industry- 

In the growth of modern industry all these 
industrial specializations grew out of finding 
a better way to do the work. They became 
necessary to facilitate business. There is, 
however, another factor—competition—which 
has helped speed up or has made necessary 
the discovery and adoption of these changes 
to industry and to business. 

Industry has to meet competition of the same 
factors as a store—price, quality, service, or 
convenience. If in one plant better machin- 



WHAT IS PRODUCTION AND WHY? 


69 


ery or better management and headwork, or 
better cooperation between capital, labor, 
and management, enable one concern to offer 
better inducements, that concern will get busi¬ 
ness away from a competitor. 

How Production Men Benefit by Competition 

Because of their position as the tie-up between 
management and labor the foremen and other 
production heads have a very important re¬ 
sponsibility in making betterments which will 
meet, or even better, competition. Their do¬ 
ing this has an important effect on the workers 
and managements too. By meeting or bet¬ 
tering competition the company is generally 
able to give its employes more steady work 
and is often both able and willing to pay a 
higher rate of wages than their competitors 
who do not have such good management nor 
such close cooperation of labor. 

With this better understanding of the princi¬ 
ples of work, particularly with our mind set 
right on why we have to work, the prob¬ 
lem of changing unhealthy to healthy discon¬ 
tent, and obtaining ambition and cooperation, 
is simplified. 

We saw in the manual “A Good Place to 



70 


MODERN FOREMANSHIP 


Work/’ how the advantages of physical con¬ 
veniences helped men produce. Right think¬ 
ing also gives to men who work a mental con¬ 
tentment which, practically every veteran 
production man knows, shows up in the 
amount of work handled. With the other 
manuals on how to handle work and how to 
handle men, production men have the neces¬ 
sary elements to meet competition and pro¬ 
vide more regular work at fair wages. 








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